1.0 Introduction
As Nigeria navigates one of the most delicate phases of its economic and energy transition journey, the role of NNPC Limited (NNPC) stands at the intersection of national expectation, economic necessity, and policy transformation. Under the Renewed Hope Agenda of the current administration, citizens expect not just reform, but results; not just rhetoric, but responsibility; not just transformation, but trust. For NNPC, this moment is more than a statutory transition. It is a covenant with Nigerians—to run transparently, commercially, efficiently, and ethically in line with the spirit and letter of the Petroleum Industry Act (PIA 2021). Whether this covenant is being kept or compromised is a legitimate question. A balanced assessment demands fairness: neither euphoria nor cynicism, but principled analysis.
During November 2025, the PEWI Petroleum and Energy Policy Forum served as a platform for intense reflection on Nigeria’s petroleum industry. The debates that dominated public discourse—ranging from Joint Venture (JV) equity sales, NNPC performance metrics, NNPC’s reported N17.5 trillion expenditure on pipeline protection, to questions surrounding the rehabilitation of NNPC’s refineries—highlighted a recurring theme: Nigeria’s most persistent challenges are not rooted in resource scarcity but in governance gaps, institutional inefficiencies, and the absence of a coherent policy compass.
Drawing from decades of petroleum economics insights, the issues raised point to a deeper structural problem: Nigeria’s petroleum sector remains misaligned with the aspirations of the Petroleum Industry Act (PIA)—a law designed to improve accountability, encourage commercial discipline, and reposition the industry for long-term value creation. Instead, the sector continues to run in a tension-filled space between legacy habits and reform expectations.
This edition of the Valuechain Energy Magazine synthesizes the discourse in November on PEWI’s Forum, distilling it into a single analytical narrative on Nigeria’s petroleum sector governance challenges and the unfinished business of industry reform within the context of NNPC post-PIA.
2.0 NNPC’s Journey Toward a Commercial National Petroleum Company
The transformation of the Nigerian National Petroleum Corporation into NNPC Limited (NNPC) through the Petroleum Industry Act (PIA) marks one of the most significant changes in Nigeria’s petroleum sector. However, it’s essential to evaluate NNPC’s progress based on facts and the principles outlined in the PIA, not on emotion or politics. Instead of asking if NNPC is flawless—which it isn’t—the focus should be on whether real progress has been made and if it aligns with the PIA’s vision for a commercial, transparent, and competitive national oil company. The results so far are mixed but promising.
Structural Transition and Governance Reforms
NNPC’s major accomplishment is its shift to a fully commercial enterprise, now registered under the Companies and Allied Matters Act (CAMA) and running like international oil companies. By adopting International Financial Reporting Standards (IFRS) and external audits, it has made significant strides toward transparency. Still, there is room for improvement in corporate governance, which will require ongoing commitment to the PIA, rather than relying on political solutions or unclear structures.
Stabilizing Upstream Operations
Working alongside security agencies and private partners, NNPC has made some progress in reducing pipeline vandalism and crude theft in certain areas, leading to modest improvements in production, even though output stays below capacity. Efforts to reopen wells and improve planning have shown operational improvements, though overall production still lags what’s possible and what OPEC allows.
Refinery Rehabilitation and Domestic Supply
While repairs have taken longer than expected, advancements at the Port Harcourt and Warri refineries are clear. Agreements with Dangote Refinery and other domestic plants suggest a path toward decreasing reliance on imports. Real credibility, however, depends on increasing actual production rather than making announcements.
Gas Infrastructure and Commercialization
NNPC aims to drive Nigeria’s gas sector, supporting projects like the AKK pipeline, CNG/LNG initiatives, and flare reduction efforts. These activities align with Nigeria’s ambition for a gas-powered economy, but faster execution is necessary to keep pace with the global energy transition.
Commercial Partnerships and Funding
* Reforming joint venture cash calls
* Securing funding for upstream development
* Partnering with global companies
These steps prove an increasingly commercial mindset, but there is still a need to boost efficiency.
Downstream Market Stabilization
NNPC’s broader retail network and supply measures have helped stabilize the market, adding commercial value. However, NNPC must avoid setting prices in a deregulated environment. According to the PIA, the market—not politics—should decide downstream pricing.
Improved Fiscal Contributions
Compared to the period before the PIA, NNPC now pays more in taxes, royalties, and dividends. Despite this progress, Nigeria still misses significant revenue due to low production and ongoing inefficiencies.
3.0 JV Equity Sales: Economic Logic vs. Long-Term Value
One major challenge that appeared involved considering the sale of the government’s Joint Venture (JV) equity in multiple upstream assets. This discussion extends beyond technical considerations and stands for a key element of strategic national economic planning.
The Case for JV Equity Sales
* Immediate revenue relief during fiscal strain
* Potential reduction of cash-call obligations
* Incentivizing private capital to take on greater operational risk
* Streamlining government involvement in commercial petroleum operations
The Case Against JV Equity Sales
* Nigeria risks mortgaging future revenue streams for immediate liquidity, contrary to long-term value maximization.
* Historically, government relinquishment of equity often leads to weakened oversight capacity, not improved efficiency.
* Without strong fiscal governance, proceeds from equity sales may not be deployed productively.
* The Federation Account may lose access to long-term royalties, profit oil, and taxes tied to JV equity participation.
A petroleum economics perspective emphasizes a fundamental principle: governments should refrain from divesting productive assets solely to address recurrent expenditures or fiscal deficits. Divestment is most proper when driven by a comprehensive, long-term national energy strategy rather than short-term fiscal considerations. The sale of joint venture interests, if not accompanied by enhanced regulatory capacity, improved fiscal discipline, and robust institutional oversight, may result in greater challenges than intended benefits.
4.0 Nigeria’s Refineries: When Sunk Costs Distort Strategic Vision
Despite spending more than N11 trillion over several decades on refinery rehabilitation, the recently published NNPC 2024 financial report presents a sobering reality: Nigeria’s refineries are collectively valued at just N2.91 trillion. The Port Harcourt Refining Company (PHRC) carries a book value of N1.14 trillion; Kaduna Refining and Petrochemical Company (KRPC) follows with N1.08 trillion; and the Warri Refining and Petrochemical Company (WRPC) are valued at N683.32 billion.
These numbers are more than accounting entries; they reflect decades of policy indecision, misaligned incentives, and the challenges of state-led operations in an industry where efficiency, capital discipline, and competition matter. They also raise an uncomfortable question: What exactly is Nigeria trying to achieve with these refineries?
For years, NNPC has functioned as a hybrid institution—part commercial entity, part national symbol, part social insurer. The result: billions spent, little transparency gained, and even less operational value delivered. With the transition to a CAMA company under the PIA, NNPC’s identity crisis becomes sharper. A central question arises: Should NNPC continue to function as a holding company that keeps majority control of refineries, allowing subsidiaries to partner for rehabilitation? Or is it time to pursue outright divestment?
My position, for whatever the worth, is unambiguous: Nigeria should sell. Retaining majority ownership while seeking technical partners is a halfway measure that sounds politically safe but is strategically flawed. It preserves control without ensuring efficiency and protects legacy roles while discouraging capital discipline. Most importantly, it keeps NNPC entangled in operations that global best practice would classify as non-core for a holding company aspiring to commercial excellence.
Outright sales offer three main advantages:
1. Forces clarity—ownership transfers responsibility, risk, and accountability in ways no management contract or minority partnership can.
2. Unlocks market-driven reinvestment—refineries require significant capital expenditure and an operating culture insulated from political cycles.
3. Signals the maturity of NNPC’s commercial transition—no globally competitive national oil company, keeps full ownership of loss-making refineries indefinitely.
The counterargument is rooted in history: refineries are national assets, symbolize independence, anchor employment, and carry political significance. However, symbolism cannot refine crude oil, nor can nostalgia generate efficiency. If NNPC stays the sole owner and operator, the cycle of rehabilitation spending, partial recovery, breakdown, and new rehabilitation rounds will continue. The financial report numbers tell a simple story: the market has already judged the refineries. Their value today is not what Nigeria has spent, but what they can realistically produce.
To change this trajectory, Nigeria must allow new owners, new capital, and new incentives to take over. Anything less is a commitment to repeating past mistakes. In this debate, I stand firmly on the side of commercial realism: Nigeria needs functioning refineries, not politically treasured ones. It needs value creation, not sentimental attachment. And it needs a future where NNPC’s balance sheet reflects commercial discipline, not inherited burdens. Only outright divestment can deliver that future.
5.0 The Controversy Over NNPC’s N17.5 Trillion Pipeline Security Expenditure
The disclosure that NNPC spent an estimated N17.5 trillion on pipeline security, under-recovery, and related energy-security costs in 2024 sparked justified concern. Such a figure demands scrutiny—not confrontation, but accountability. Modern petroleum economics requires transparency, clarity, and quantification of cost drivers, not broad figures without line-item breakdown.
The persistent burden of pipeline protection remains one of the least defensible inefficiencies in Nigeria’s upstream and midstream operations. Pipeline vandalism is not merely a technical or security issue; it is a governance failure. When pipeline protection becomes a recurring and astronomically expensive line item, it signals deeper dysfunction: weak institutions, political complicity, lack of deterrence, inadequate surveillance technologies, and a governance structure that enables inefficiency.
The PIA intended NNPC to run as a commercially oriented company—insulated from political interference, guided by transparency, and capable of delivering value to shareholders. Yet, when the company is compelled to fund what are essentially national security responsibilities, it undermines both commercial viability and the reform agenda. Nigeria cannot compete globally when a sizable part of petroleum revenues is consumed by preventable security-related costs. The November conversation was not about criticizing NNPC but about highlighting the systemic misalignment between PIA expectations and operational realities.
6.0 NNPC’s 2024 Profit and Its Post-PIA Obligations
NNPC recently announced a N5.5 trillion profit on a N41.5 trillion revenue for the 2024 fiscal year, a noteworthy development that signals movement toward the commercial posture envisioned by the PIA 2021. However, as with all numbers in the petroleum sector, the headline figure is just the entry point, not the final judgment. A profit announcement alone does not tell the full story. In corporate finance, profit is not synonymous with dividends.
Decisions on distribution, retention, and reinvestment fall within the remits of a properly constituted Board of Directors. This points to one of the governance questions still surrounding the post-PIA NNPC transformation: the need for fully institutionalized corporate governance practices, free from political interference and aligned with global best standards for national oil companies.
The 2024 result must be contextualized. While improved crude prices and heightened trading activities boosted revenue, the more important question is whether this profit resulted primarily from operational efficiency or was shaped by accounting adjustments and one-off factors. Sustainable profitability is the true measure of a commercially oriented NOC, not a single-year spike. The PIA envisioned an NNPC that would run like Petronas, Equinor, Petrobras, or even the smaller but well-run African NOCs—thriving on transparency, disciplined cost management, operational autonomy, and predictable reporting. While NNPC has made commendable strides—more public disclosures, increased investment participation, greater visibility in trading and supply chains—gaps remain.
Transparency, the cornerstone of the PIA, is still a work in progress. Disclosures on domestic crude deliveries, product swaps, pipeline losses, and crude evacuation costs remain insufficiently detailed. The company continues to carry quasi-fiscal burdens, both inherited and arising from ongoing policy inconsistencies, which remain obstacles to true commercial orientation. Competitive NOCs need a clear legal and governance architecture; ongoing ambiguity in the ownership structure sends mixed signals to investors and partners.
To be fair, NNPC is making strides. Expanding upstream participation, renewed focus on gas infrastructure, refinery rehabilitation, and a more agile trading posture are all positive indicators. However, progress must be measured against expectations, not emotions. The vision of the PIA was not just to make NNPC profitable; it was to make it transparent, competitive, and sustainably profitable, returning value to its shareholders, which ultimately includes the Federation.
The 2024 numbers suggest NNPC is moving forward, but not yet at the necessary velocity to close the gap between aspiration and actualization. A truly transformed NOC must prove consistent efficiency, predictable fiscal behaviour, and uncompromised governance discipline. Profit is good; sustainable profit built on operational excellence is better; sustainable profit accompanied by transparency, prompt disclosures, and a fully empowered Board is best.
Thus, while the N5.5 trillion profit is a positive development, Nigeria’s expectation—indeed its right under the PIA—is higher. Nigerians want and deserve a national energy company that is not only profitable, but trustworthy, accountable, globally competitive, and immune to political expediency. The Renewed Hope Agenda cannot be fulfilled by numbers alone; it must be anchored on institutional credibility and governance discipline. NNPC’s covenant with Nigerians is simple: profit must translate to value, value must be backed by transparency, and transparency must be sustained by governance rooted in the rule of law. Only then can the transformation promised by the PIA evolve from aspiration to reality.
7.0 The 20% Retention Rule: Why NNPC’s Profit Is Not Automatically 80% Dividends
Section 53(7) of the PIA states that NNPC “shall declare dividends to its shareholders and retain 20% of profits as retained earnings” to grow its business. However, this does not automatically mean the remaining 80% must be paid out as dividends. That interpretation is respectfully disagreed with.
NNPC is not subject to the Fiscal Responsibility Act, and that exemption is significant. It shows the law’s intention was not to micromanage profit distribution but to ensure baseline retention. Global best practice does not support a rigid “80% for shareholders” rule. No commercially oriented company—Petrobras, Petronas, Equinor, or Aramco—distributes all non-retained profit as dividend. In corporate finance, companies use part of their profit to service or repay debt, strengthen cash reserves, fund capital projects, and reinvest for long-term stability. Even with the statutory 20% retention, unused profit can still support debt repayment and internal reinvestment—this is normal, prudent corporate practice.
Therefore, NNPC’s profit distribution should not be confined strictly to shareholders. Legislating the micro-allocation of profit in a limited liability company undermines its commercial autonomy. The same logic applies to the longstanding objection to distributing 30% of NNPC’s “profit oil” to the Frontier Exploration Fund—it contradicts the spirit and philosophy of the PIA and deviates from global NOC governance standards. Governance, value creation, and intergenerational equity demand a focus on what ought to be, not just what is.
8.0 Conclusion: Nigeria’s Petroleum Future Depends on Strategic Discipline Over Sentiment
The issues that dominated November 2025 highlight a singular truth: Nigeria’s petroleum sector is capable of greatness, but greatness requires discipline. It requires confronting inefficiencies, rejecting political expediency, and enforcing the rule of law across the value chain. Nigeria’s struggles stem not from a lack of resources, but from a governance curse. This challenge can be overcome through effective leadership, consistent policies, institutional integrity, and learning from countries that have succeeded in similar journeys.
To recover lost time and build an energy future founded on openness, competitiveness, and real value creation, November’s conversations must evolve into concrete actions. Reform is not a one-time event—it’s a continuous journey. That journey begins with a commitment to accountability, clarity, and responsible resource management to drive transformative changes.NNPC was never expected to solve all the industry’s challenges at once, but it has made significant strides in restructuring, improving security, repairing refineries, expanding gas networks, forming new partnerships, supporting downstream markets, and boosting fiscal returns. These achievements are progress, though much work remains.
The long-term success of NNPC hinges on good governance, genuine commercial independence, and rigorous PIA compliance. Sustainable value will come from strong principles and governance, not political shortcuts. For NNPC to become a leading global oil company, continued reforms are essential. Governance practices must be enhanced, and performance should be judged by the criteria outlined in the E-QUAD—efficiency, transparency, ethics, effectiveness, and equity. By following these standards, Nigeria can fully harness the benefits of the PIA and unlock the full potential of its oil and gas sector.
OMOWUMI O. ILEDARE, PhD,
Sr. Fellow USAEE, Fellow NIPetE,
Fellow EI, Professor Emeritus,
Louisiana State University, Baton
Rouge, USA & Executive Director,
Emmanuel Egbogah Foundation,
Abuja, Nigeria.